Standing at the Crossroads

Phenomenal growth in West Hawaii fuels the Big Island’s ongoing debate over

November, 2003

About 20 years ago, Kilauea began erupting, pushing lava through one Big Island town after another. In 1990, the volcano blazed its most destructive path through Kalapana, claiming more than 100 homes in nine months.

Harry Kim, then the county’s civil defense director, stood alongside residents while they watched their homes burn to the ground. Some looked on in silence. Others wept. One resident, in particular, was angry. But not, surprisingly, about the devastation.

“He pulled me aside and said, ‘Look what you guys did,'” Kim recalls. The distraught resident pointed out the town’s overloaded cesspool, its deteriorating public park.

Kim continues, “And then he told me, ‘You see this nice pavilion? You see this volleyball court? You guys didn’t put these things in here for us; you make ‘em for the outsiders, not the locals. We no come here no more. We glad Pele take this place, because we lost ‘em a long time ago.'”

Kim never forgot the encounter. It vividly illustrated one unmistakable trait of the Big Island: its ambivalence about development. Over the past decade, the growing number of resort-residential properties on the west side has fueled this recurring debate.

These developments are crucial to the Big Island’s economy, by way of jobs and county tax revenues, says Kim. At the same time, he worries about problems associated with such growth: an increasing lack of affordable housing in Kohala and Kona; traffic congestion; a lagging infrastructure and opposition from community groups.

“My job here is to make Hawaii Island a nice place to live, not just a nice place to play for a certain group of people,” says Kim, the county’s mayor since 2000. “Not to be disrespectful of Oahu or Maui, but we can’t be guilty of developing a place that’ll lock out the locals. We don’t want this to be a gated community, an island for the rich, a place of haves and have-nots.”

The robust growth shows no signs of slowing down anytime soon. For the first seven months of this year, the total value of residential building permits authorized on the Big Island exceeded $293 million, an 81.4 percent increase from the year prior.

Cyndy Staudt, executive director of the Kona-Kohala Chamber of Commerce, says: “It scares me a little bit, because I see developments coming in, people moving in left and right. One of my directors told me that Kona is like Fort Lauderdale in the ’50s, before the boom.”

On the flip side, others maintain that such sentiment could discourage future projects – a potentially huge loss for an economy just starting to take off.

WESTERN WONDERS

The 20-mile stretch known as the Kohala Coast is home to some of the state’s top resort destinations – Mauna Kea, Mauna Lani, Waikoloa, Kona Villages and Kaapulehu – which account for 3,702 visitor rooms, according to the Kohala Coast Resort Association.

But tourism is no longer the driving force behind the west side’s phenomenal growth. No new hotels have been constructed since the mid-1990s. Economic growth in recent years can be attributed largely to the spate of resort-residential developments in Kona and Kohala.

“Although these areas were master-planned for multiple hotels, I don’t think there’s going to be any more hotel development here,” says former South Kohala councilman John Ray, who’s now president of the Hawaii Leeward Planning Conference, a nonprofit representing some of the island’s largest landowners. “Since it’s so expensive to build and operate a hotel, and because individual-lot real estate values have gone up so much, the landowners say, ‘Shoot, turning these areas into residential properties makes a lot more sense.'”

Hualalai Resort pioneered this trend in the mid-1990s. Originally, developers planned a large hotel. Later, they opted to build the bungalow-style accommodations that exist today, as well as resort-residential units. The company has sold more than 220 units to date.

Within the next eight to 10 years, Hualalai should have completed 600 homes, Vice President Jeremy Sosner says. They don’t come cheaply. Vacant lots start at $1.5 million, condominiums at $1.7 million and houses at $4 million.

Resorts such as Waikoloa, Mauna Lani, Mauna Kea and Kukio have followed Hualalai’s lead. The Hawaii Leeward Planning Conference commissioned a 2003 study of the economic impact of resort-residential communities.

The study found that these communities contain about 2,280 existing or platted homes, condominiums and lots. By 2008, the west side will see a 68 percent increase in units.

Existing units contribute about $22.3 million in property tax revenues yearly, about 21 percent of the county’s total. That figure will reach $55.5 million by 2008.

“Since many of these homeowners are nonresidents, they require way less area services than full-time residents,” Ray says. “They have a relatively low impact on infrastructure and virtually no impact on the school system. It’s a great deal for all of us.”

STUMBLING BLOCKS

Not all Big Islanders have welcomed resort-residential developments, even with the hundreds of millions of dollars they’ve poured into the local economy. In the late 1990s, the first such development encountered opposition from Native Hawaiian groups, which argued that Hualalai’s shoreline dredging project threatened culturally significant sites. Hualalai Development halted the project and worked with community groups to reach an out-of-court settlement.

These days, luxury development Hokulia seems like the poster child for good developments gone bad. The Kealakekua project, developed by 1250 Oceanside Partners, started construction in 1998. Since then, Native Hawaiian and environmental groups have sued the developer, saying it failed to obtain proper approval from the state Land Use Commission. In September, a circuit judge agreed with the plaintiffs and ordered a stop to construction.

Some Big Islanders resent that rising real estate values have made it nearly impossible for the working or middle class to afford homes on the west side. Thousands of residents who work in the Kona and Kohala areas traditionally choose less expensive homes in South Kona, Kau or even Hilo and Puna in east Hawaii – easily a two-hour commute away.

“In the old days, you’d have to go very far to find anyone living in Kau who worked in Kona, but it’s become the bedroom for workers in North Kona and South Kohala,” Kim says. “It’s part of the statewide crisis we’re having with affordable housing.”

West Hawaii’s roadways haven’t kept up with the changes, either. Even Kim calls the roads there “a nightmare of a traffic problem.”


TOURISM
In 2002, the Big Island saw more than 1.24 million visitors, a 5.2 percent increase from the year prior, according to the state Department of Business, Economic Development and Tourism. Next year, the Big Island will enjoy a boost in visitor numbers. In July, Norwegian Cruise Line will sail its first, 2,000-passenger, U.S.-flagged ship to Hawaii, which will include stops in Kona and Hilo. NCL’s second such ship will start cruises in October 2004. A third is scheduled for 2006.


 

Rick West of the Hawaii Economic Development Board notes that the Kona area faces other infrastructure issues, as well. The area’s water supply systems, airport and harbors also need upgrades.

“We’re getting to a crossroads where things have to happen in the right direction or we’re jeopardizing growth,” West says. “Most of us, especially those of us raised here, feel that this should be orderly, managed growth. There’s lots of room for development, but you get to a critical point where things start to deteriorate. In some respects, we’re already there.”

Several county projects are under way to help ease traffic, at least. The county has moved forward with plans to widen Queen Kaahumanu Highway from two lanes to four between Kona International Airport and Henry Street in Kailua. Plans for the long-awaited Alii Parkway, which would connect Kailua and Keauhou, are also in the works. And, earlier this year, U.S. Sen. Daniel Inouye announced that reconstruction on Saddle Road would finally begin in the first quarter of 2004.

“Hopefully all of these projects will come together and ameliorate the problem five years from now,” says Mark Richards, president of Maryl Group Inc., which is working on several developments in Kona. “Until then, though, we’ll see continued growth, more traffic problems, more construction. In other words, it’ll get worse before it gets better.”

GREENER PASTURES

Not long ago, it was the east side that worried most county residents. By the mid-1990s, sugar had died, and many thought it would take much of the Big Island with it. They were wrong, says Paula Helfrich, executive director of the Hawaii Island Economic Development Board. The rainy side of the island enjoys a stable economy, as diversified agriculture continues to mature.

“We used to have three big plantations, each with about $40 million in annual revenues and about 500 employees – it was one commodity, one market, one production cycle on 220,000 acres of land,” Helfrich says. “Since then, we’ve tripled the value of production [to more than $120 million], and we now have a total of about 7,000 people working in some capacity in agriculture.”

William Julian and his wife, Cathy, farm about 250 acres of papaya in Pahoa. Julian, a former sugar worker, sends more than 2 million pounds of papaya to market each year.

Although Julian is one of the largest papaya growers in the state, he isn’t immune to the problems many local growers face: slim margins, unpredictable weather and international competition. Not to mention that papaya prices remain relatively flat, hovering between 20 cents and 30 cents per pound.

North of Julian’s farm, orchid farms flourish in the higher elevations of south Hilo. According to Hawaii Agricultural Statistics Service, 2002 grower sales in the island’s floriculture sector exceeded $47 million, more than half of sales statewide.

Agriculture’s fastest growing segment is tropical fruits, such as rambutan, longan and dragonfruit. In 2001, there were 80 such growers with $736,000 in sales on the island.


 

UNIVERSITY OF HAWAII AT HILO
Several projects are in the works at UH Hilo, an increasingly important economic driver in East Hawaii. Construction on the $59 million Pacific Basin Agricultural Research Center will begin this year at the University Park of Science & Technology. The $28 million Mauna Kea Astronomy Education Center is now under construction.


 

Barry Taniguchi, president of KTA Super Stores, would like to see local growers put more effort into exporting products. “We gotta look at exporting, rather than just circulating the same money,” says Taniguchi, whose stores market Big Island-made products through its Mountain Apple Brand. “Hilo is like the circulation of old money. It’s not money coming in per se, like with construction in west Hawaii.”

A TEMPLATE FOR GROWTH

One of the newest developments on the west side is The Shores at Kohanaiki, just north of Kailua-Kona. In September, Kim uncharacteristically praised the high-end residential project, hailing it as a template for smart growth on the Big Island.

California-based Rutter Development Corp. will develop about 500 homes and a golf course on the 540-acre property. In return for community support of the project, Rutter Development and partner Kennedy-Wilson International will provide a 128-acre coastal park and a public beach facility.

The plan is a far cry from what developers had in mind a decade ago. Kohanaiki, or “Pine Trees,” is a longtime popular surf hangout. In the 1980s, Kohanaiki’s then-owner and Japanese developer Nansay Hawaii planned a sprawling resort. Community groups opposed the project, arguing their right to shoreline access. Native Hawaiian groups also got into a dispute with Nansay over the project’s impact on traditional shrimp fishing.

In 1995, Nansay filed for bankruptcy. Beverly Hills-based Kennedy-Wilson International assumed ownership of the property.

“Kennedy-Wilson tried to sell it to six, seven, eight different people, but as soon as they found out its controversy, they didn’t want to waste their time,” Kim says. “So they hired Rutter. For nine months, the landowner, the developer, the surfing community, Native Hawaiian groups worked together to develop this plan. Now, 100 percent of that coastline will be preserved for open space.”

This is Kim’s model of how things should work on the Big Island.

“Kohanaiki is the example of

how we can all work together,” he says. “We’re all responsible for balancing economic growth and preserving our heritage.”

SEEKING SOLUTIONS

Economist Leroy Laney isn’t surprised by the Big Island’s love-hate relationship with development. It’s a common theme throughout the state, he says.

“When I first came to Hawaii in 1990, there was this same rhetoric, this disagreement over growth, and it went away in the middle part of the ’90s when the economy was very weak,” says Laney, an economics professor at Hawaii Pacific University and consultant to First Hawaiian Bank. “With the economy getting stronger, the same sentiment is resurfacing, but you can’t have growth and not have the problems of people not liking this high-end lifestyle.”

Community members want to see the ongoing argument resolved. Helfrich says developers need to communicate more with the community, and vice versa.

“Right now, development is in a vacuum, people are not talking to each other about how to build roads to get from one subdivision to the next,” Helfrich says. “Locals also need to reach out more to newcomers to educate them about our ways, our Island culture.”

Ray of the Hawaii Leeward Planning Conference understands residents’ concerns. At the same time, he wants people to be realistic about development, as well as expectations for infrastructure improvements.

“Is it a perfect situation? No,” he says. “Is Hapuna Beach still as pristine an experience as it was before the Hapuna Beach Hotel? No. Nowhere is as nice as it was when we grew up. But if you look at it in terms of the property tax revenues, the job creation, the low impact – it’s a pretty good tradeoff.”

 

Island of Extremes

The Big Island covers more than 4,000 square miles, larger than all the other islands put together. In 2000, the U.S. Census Bureau noted the following:

  1. A. Kau reports the highest percentage of residents who commute more than an hour to work – about 34 percent. B. The Paauhau-Paauilo census tract in Hamakua has the second-highest percentage, with about 27 percent taking more than an hour to reach their workplaces.
  2. These adjoining census tracts in North Kona (A. Kahului-Kaumalumalu and B. Kaumalumau-Kealakekua) report the highest per capita incomes on the island, both exceeding $26,000.
  3. A. The Pahoa-Kalapana area in the Puna district reports the lowest per capita income on the Big Island, around $12,500. B. The Keaukaha-Panaewa tract in Hilo has the second lowest, around $13,800.
  4. More than one-fifth of the residents in these eight census tracts report income below the poverty level.
  5. These two North Kona census tracts (A. Kahului-Kaumalumalu and B. Kaumalumau-Kealakekua) have the highest percentages of White residents, making up at least half of the each area’s populations.
  6. These two Hilo tracts (A. Puainako and B. Kawailani) have the highest percentages of Asian residents, making up more than half of each area’s populations.
  7. A. About 34 percent of residents in the Hilo tract Kekauha-Panaewa consider themselves Hawaiian, the highest such percentage on the island. B. The second-highest percentage of Hawaiians resides in the Kona tract Kalaoa. Both tracts contain land designated as Hawaiian Home Lands.
  8. North Kona boasts the county’s highest residential median sales price, according to Hawaii Information Service. Through July 2003, North Kona’s year-to-date median price was $370,000, a 19 percent increase from the same period last year.
  9. Puna saw the lowest median residential sales price: $106,500, even with a more than 20 percent increase from 2002, according to HIS.
  10. In July, West Hawaii saw a 3.5 percent unemployment rate, according to the county’s Department of Research & Development.
  11. That same month, about 8.8 percent of East Hawaii’s labor force was unemployed, county R&D reports.

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